Evergrande Property Raises Over $1.8 Billion in Hong Kong IPO

November 30 14:20 2020
Evergrande Property Raises Over $1.8 Billion in Hong Kong IPO

Real estate giant, Evergrande Property, meets lukewarm reception from the capital market as the company raises $1.8 billion in IPO

Evergrande Property Services Group was able to raise about $1.8 billion in their Hong Kong IPO, as the stocks were priced at the lower end of expectations due to worries about its debt-laden parent company.

Evergrande has too much debt…the listing of the property services unit is to save the parent; Evergrande will continue to sell shares (in the unit) after the listing to cut debt,” said Francis Lun, chief executive of GEO Securities.

The offering is coming after a run of setbacks for China Evergrande Group, the second-biggestproperty developer in the country. The company is also reputed to be heavily indebted. It includes a secondary share sale in October, raising only half of its initial target and the ditching of the planned injection of most of its property assets into a Shenzhen company via a backdoor listing.

Despite the seemingly below par performance of the IPO, the price represents a 5% increase from a $3 billion private funding round done in August, with shares issued at HK$8.375.Evergrande Property is currently valued at HK$95.06 billion ($12.3 billion) at HK$8.80 per share, with 50% of the funds raised going to the parent firm. There is also a greenshoe option that could take the size of the stake sold from 15% to 17% of exercised.

It is an open secret that company has been scrambling for cash following Beijing’s clampdown on “excessive borrowing in the real estate development sector,” with a consideration of new debt-ratio caps. However, analysts on the credit and sell-side have allayed fears of any possible default to the company’s various fund-raising options.

Evergrande has also been able to reach agreements with most investors to keep the equity in property assets as opposed to demanding repayment. This will go a long way in relieving the company’s debt burden.

Some market analysts opine that the IPO got a relatively cool reception due to a slew of property services-related listings in Hong Kong and the view that the sector is currently overvalued.

The likes of Shimao Services Holdings Ltd and other major players in the property market have also priced towards the middle or upper end of ranges.

So Evergrande has to face reality and set a lower price in the hope of getting a higher trading price after IPO,” said UOB Kay Hian director Steven Leung.

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